For tourism businesses, recognizing these evolving patterns, new trends and the need for innovation (i.e. new ideas and products) to address market conditions re-emphasizes the importance of man- agerial skills in the supply of tourism products and services – as discussed in the InterContinental case study in Box 4.1 , where the
BOX 4.1: CASE STUDY: CORPORATE STRATEGY AND CHANGE IN THE HOTEL SECTOR: THE EVOLUTION OF THE INTERCONTINENTAL HOTELS GROUP
The InterContinental Hotels Group can be traced back as far as 1777 when William Bass first established a brewery at Burton on Trent in the UK, and in the subsequent growth the company acquired other brewing concerns in the twentieth century. It merged in 1967 with Charringtons, making it one of the largest brewers in the UK. Following UK government legislation in 1989 (the Beer Order legislation) to reduce vertical integration and the number of tied public houses owned by breweries, Bass withdrew from many public house outlets and invested cash flow from its public house business into an international hotel business. The company already had a small hotel chain, acquired in 1987, but its major entry into the market was marked with its purchase of Holiday Inns International in 1988 and the North American Holiday Inn in 1990.
In 1990 Holiday Inn was reputed to be the world’s leading mid- scale (mid-range) hotel brand, founded in 1952 by Kemmons Wilson in Memphis. In 1991, the company launched its Holiday Inn Express brand, a limited service brand aimed at the leisure and business market. By 2005, some 150 Holiday Inn Expresses were in existence in the UK and Europe, illustrating the scale and growth of this popular product. In 1994, the com- pany also launched its luxury upscale brand – Crowne Plaza. In 1997 the company sold its mid-scale properties in the USA, retaining the brand through franchise agreements. Other non-core business was disposed of in the late 1990s, including Gala Bingo, Coral Bookmakers and additional public houses. Bass also moved into the eating-out business in 1995, with its acquisition of Harvester and other smaller businesses. The company continued to build its luxury business portfolio, launching its Staybridge Suites brand. In 1998 the company also acquired the InterContinental hotel chain (originally founded in 1946 by Pan Am airlines) initially in Latin America and then across the world in places served by the airline (includ- ing its 40 000 aircrew as customers). InterContinental operated in the mid- scale and upscale segments with a reputation for attention to detail.
In 2000, Bass purchased the Southern Pacific Hotel Corporation (SPHC) in Australia to make it Asia’s leading hotel company with 59 hotels using the Park Royal and Centra brand. This was followed by the acqui- sition of Bristol Hotels and Resorts in the USA, a management company with 112 hotels. In June 2000, the Bass brewing division was sold to a Continued
126 CHAPTER FOUR The supply of tourism
Belgian brewer for £2.3 billion, and the company was finally repositioned, having moved from a domestic brewer to an international hospitality busi- ness. Bass then sold 988 pubs in 2001 to Six Continents Retail Brands and acquired the UK Posthouse chain for £810 million, as locations of stra- tegic value for conversion to Holiday Inns. The company also purchased the InterContinental Hong Kong for £241 million and, in October 2002, it separated its hotels business from its hospitality retailing division, creating InterContinental Hotels Group plc.
In July 2003, InterContinental Hotels Group decided to sell its Staybridge Suites hotels, entering into a 20-year management agreement with the purchaser, Hospitality Properties Trust. In December 2003, the company added Candlewood Suites to its portfolio, increasing its US pres- ence to 109 hotels. In 2004, the company introduced Hotel Indigo, an alternative lodging experience. By 2004, the company had a global pres- ence, as one of the world’s largest hotel groups, owning, leasing, franchis- ing or managing properties and operating over 3500 hotels worldwide with 537 000 guest rooms in 100 countries. This had expanded further by 2008 to 590 000 rooms in 4000 hotels in 100 countries with 160 million staying guests.
In 2007 the company’s InterContinental brand celebrated the opening of its 150th hotel at the Dubai Festival in an expanding destination. Similarly in 2008 the company is opening the InterContinental Beijing which is the closest luxury hotel to the Beijing Olympic stadium.
Bass had properties in a number of market segments including:
● economy
● mid-scale, limited service
● upscale – high-quality service for leisure travellers
● upper upscale – luxury brands for business travellers and international tourists.
In 2005, the company was divesting itself of many of its lower tier prop- erties, franchising them or managing them, since its current strategy is to focus on its strengths in branding, managing and franchising as well as brand innovation. It has preferred to concentrate on the market segment with greater profit margins, the mid- and upscale segments. For example, in November 2006, two flagship luxury hotels were launched: the InterContinental Park Lane, London (after a £67 million refurbishment), and the InterContinental Boston, USA, on the city’s historic waterfront on the site of the Boston Tea Party which sparked off the American War of Independence, in close proximity to the city’s financial district and business tourism market. Therefore, the Group has invested in upmarket properties
and reduced its capacity by selling the majority of its hotels, to focus on what it excels at – managing hotels – thereby simplifying its asset owner- ship and concentrating on the skills of its employees. This example of one company’s corporate strategy in the period since 1989 reveals its evolution into a global hotel chain and the process of constantly reviewing its stra- tegic direction to assess how best to achieve its commercial potential.
creation of new brands led to the growth of new business. This also highlights what Mintzberg (1973) identified as the nature of managerial work in organizations – short-term coping, disparate activities and more concerned with brevity, variety and increasing fragmentation. Tourism managers and businesses are no excep- tion to this and Mintzberg’s research has an important bearing on how managers performed certain roles (see Table 4.1 ) labelled as TABLE 4.1 Mintzberg’s ten managerial roles (source: Reproduced from
Tourism Management, vol. 25, S. Charaupunsirikul and R.
Wood, Mintzberg, managers and methodology, 551 –6, © 2002, with permission from Elsevier)
Interpersonal roles:
Figurehead Symbolic head: obliged to perform a number of routine duties of legal and social nature
Leader Responsible for the motivation of subordinates; responsible for staffi ng and training
Liaison Maintaining self-developed network of outside contacts/informers who provide information and favours
Information roles:
Monitor Through seeking and receiving a variety of special information, develops through understanding of organization and environment
Disseminator Transmits information received from outsiders and subordinates to members of the organization
Spokesperson Transmits information to outsiders on organization’s plans, serves as expert on organization’s industry
Decisional roles:
Entrepreneurial Searches organization and its environment for opportunities to bring about change
Resource allocator Responsible for the allocation of organizational resources of all kinds
Negotiator Responsible for representing the organization at major negotiations
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interpersonal, informational and decisional roles. The ten mana- gerial work roles which Mintzberg identified illustrates the scope of activities which operating and managing a tourism business require, as well as some of the complexities of how the individual business interacts with the wider body of interests conveniently labelled the ‘tourism industry ’. It also suggests how important pre- vailing market conditions are when they impact upon how a busi- ness operates, manages and responds to opportunities, threats and shortcomings in its own organization. Yet to do this, a business needs also to understand its relationship to other tourism busi- nesses. A convenient way to explain this is by using the tourism supply chain concept.